Since the last time we updated this guide on bitcoin and altcoin legality by state, many of the states have moved to define their stance on altcoins. While some are legitimately concerned about money laundering and crime reduction, the vast majority of the states are seeking to define how they would approach distributed ledgers or blockchains, altcoin’s underlying technology.
This is reflected by the large number of states that now have laws to recognize the legality of blockchain-based autonomous agents or “smart contracts,” as well as the data these “smart contracts” may utilize or create. While some states, like Arizona, is using these new laws to forge new grounds in existing political debates – such as establishing new protections for gun holders – the majority of these regulations are the foundation to new frameworks for blockchain regulation.
Here’s a look at the state of state-based altcoin legislation as of May 29, 2018.
United States Bitcoin Regulations
On a national level, the Federal Reserve and the Internal Revenue Service have taken the following positions:
- Bitcoin – and all altcoins, for that matter – are not currency, but a taxable commodity akin to stocks. While individuals and businesses are free to use any private currency they wish to conduct business, bitcoin and altcoins are not recognized as legal tender.
- Similar to property, bitcoin earned for services rendered are taxed as income.
- Bitcoin paid for services rendered or to independent contractors must be reported on IRS Form 1099, with self-employment tax possibly being applicable.
- Finally, capital gain on altcoins is taxable, as gains would be in stocks and bonds.
The government has taken a cautious position toward bitcoin money transmitters. Despite court decisions stating that bitcoin can be used as money, the Securities and Exchange Commission has issued investor alerts to warn against bitcoin fraudulent investment schemes. The U.S. Department of Treasury’s Financial Crimes Enforcement Network has also issued guidelines instructing money transmitters to enforce Anti-Money Laundering (AML) and Know Your Client (KYC) measures.
Most states have yet to consider legislation on bitcoin and altcoins. However, for the states that have imposed legislation, here’s a rundown of the current regulations by state.
|State||Altcoin Friendly?||Legislation Status||Notes|
|AL||Murky||Regulated||Altcoin businesses are required to obtain a money transmitter’s license.|
|AK||Murky||Legislation introduced||HB 180 (2017) would require altcoin businesses to be defined as money transmitters, requiring a license. The bill is currently tabled in committee.|
|AZ||Murky||Regulated/Legislation introduced||HB 2216 (2017) made it illegal to create a blockchain-empowered firearms registry or to compel any Arizona resident to use one, while HB 2417 recognizing the legality of “smart contracts.” Other bills being considered would introduce income and capital gain taxes to altcoin revenue, set up the legal framework for ICOs offered in the state, and make it illegal for a city or town to ban the establishment of a blockchain node in a residence.|
|AR||No opinion||Not regulated|
|CA||Murky||Regulated/Legislation introduced/Legislation defeated||SB 843 (2016) made raffles for bitcoin or other altcoins illegal. AB 2658 (2018, pending) would recognize the legality of “smart contracts,” as well as private ownership to personal information stored on a blockchain. AB 1326 (2016, defeated) and AB 1123 (2018, defeated) would have required altcoin businesses to secure a license to operate from the Commissioner of Business Oversight.|
|CO||Friendly||Legislation introduced||SB 86 (2018) would instruct the state’s Chief Information Security Officer to assess the pros and cons of integrating distributed ledger technology to all of the state’s public agency data systems.|
|CT||Hostile||Regulated/Legislation introduced||HB 6800 (2016) required altcoin transmitting companies to obtain a money transmitter license. HB 7141 (2017) requires money transmitter license holders that are entrusted to take care of altcoins for a person or business to hold altcoins of the same type and amount at all times. HB 5001 (2018) would establish a service fee for altcoins traded in the state.|
|DE||Friendly||Regulated||SB 60 (2017) offers statutory authority for state corporations to convert corporate records to a blockchain ledger.|
|FL||Friendly||Regulated/Legislation introduced||HB 1379 (2017) defined the term “virtual currency” and prohibits its laundering. HB 1357 (2018) would permit the implementation of protocols for electronic credentialing.|
|GA||Hostile||Regulated/Legislation introduced||HB 811 (2016) gave state regulators the power to create rules for the regulating of altcoin businesses. SB 464 (2018) required the state’s tax collector to accept altcoins for the payment of taxes and license fees. These altcoin payments would be immediately converted to fiat currency.|
|HI||Hostile||Banned/Legislation introduced||In 2014, the Commissioner of Financial Institutions dictated that no company is licensed to transmit or handle altcoins in Hawaii and that “if companies are offering to transmit bitcoins, they are doing so in violation of Hawaii’s money transmitter laws.” HB 1481 (2018) would create a working group to study the state’s best practice to blockchain technology. SB 2853 and SB 3082 (2018) would break the existing ban on altcoins by defining altcoins as being under the auspice of the Money Transmitters Act and by establishing rules for altcoin money transmitters.|
|ID||No opinion||Not regulated|
|IL||Friendly||Legislation introduced||HB 5335 (2018) would allow for any state tax to be payable in altcoins. HR 120 (2017) would create a task force to study the benefit of a transition to blockchain-based recordkeeping.|
|IN||No opinion||Not regulated|
|IA||No opinion||Not regulated|
|KS||Friendly||Not regulated||Kansas’ official opinion is that no money transmitter license or other regulation beyond federal oversight is needed for altcoin businesses.|
|KY||No opinion||Not regulated|
|LA||No opinion||Not regulated|
|ME||Murky||Legislation defeated||SB 950 (270) would allow for a study toward using blockchain in conjunction with paper ballots in state elections.|
|MD||No opinion||Not regulated|
|MA||No opinion||Not regulated|
|MI||No opinion||Not regulated|
|MN||No opinion||Not regulated|
|MS||No opinion||Not regulated|
|MO||No opinion||Not regulated|
|MT||Friendly||Not regulated, but government investment/intervention in altcoin business||Montana has invested $416,000 in Project Spokane, which is a data center that provides blockchain security services to the bitcoin network.|
|NE||Murky||Legislation introduced||LB 691 (2018) would define altcoins under the state’s Money Transmitter Act. LB 695 (2018) would allow for the legality of digital signatures and “smart contracts.” LB 694 (2018) would prohibit the taxing of blockchain technology by local governments. LB 987 (2018) would create a regulatory framework for altcoin business activity.|
|NV||Friendly||Regulated||SB 398 (2017) allowed electronic signatures on a blockchain to be legal, banned local governments from taxing a “smart contract” or blockchain technology, and other provisions.|
|NH||Friendly||Regulated/Legislation defeated||HB 552 (2015) would have allowed the state to develop a plan to accept bitcoin as payment for state taxes and fees. HB 436 (2017) exempted altcoin businesses from needing to register as a money transmitter.|
|NJ||Friendly||Regulated/Legislation introduced||AB 3433 (2017) allowed an executor, agent, or trustee to manage the electronic records of a principal or decedent. AB 1906 (2018) would establish a regulatory framework via the Digital Currency Jobs Creation Act.|
|NM||Hostile||Regulated||HB 250 (2016) required money transmitters to obtain a license. It is unclear if this applies to altcoin businesses.|
|NY||Hostile||Regulated/Legislation introduced||23 NYCRR 200 (2015) or BitLicense is a framework that required a $5,000 license for altcoin businesses in the state. A reform bill on BitLicense is pending. AB 8780 (2017) recognized the legality of blockchain-held signatures, records, and “smart contracts.” AB 8792 (2017) would enable a task force to study the use of blockchain to safeguard election integrity. AB 8793 (2017) would establish a task force to explore the use of blockchain for record keeping and information storage purposes. AB 8783 would create a task force that would study the effect of altcoins on the state’s financial markets. AB 9685 (2018) would create a task force to study the potential and impact of a state-issued altcoin.|
|NC||Murky||Regulated||HB 28 (2016) included altcoin businesses in the auspice of the state’s Money Transmitter Act. HB 229 (2017) required altcoin money transmitters to obtain a license and secure insurance on altcoin transmission.|
|ND||Murky||Legislation defeated||SB 2100 (2017) would have created a “legislative management study” on altcoins.|
|OH||Murky||Not regulated||Ohio’s Department of Public Safety has decided that altcoins cannot be used for the purchase of alcohol. This is, however, an opinion based on federal recognition of altcoins as a commodity.|
|OK||Hostile||Regulated||Okla. Stat. Ann. § 1-9-332 stated that altcoin transferees are not to be afforded money transfer protections while maintaining there is an “existing security interest” attached to altcoin transactions.|
|OR||Murky||Regulated||SB 277 (2015) required altcoin businesses to register as money transmitters, subject to licensing.|
|PA||Murky||Regulated||HB 850 (2016) defined altcoins as money.|
|RI||No opinion||Not regulated|
|SC||Murky||Regulated||AB 266 (2016) required money transmitters to be licensed.|
|SD||No opinion||Not regulated|
|TN||Murky||Legislation introduced||Tennessee’s official position is that altcoins are not money and therefore require no licensing. HB 1507 would recognize the right to do business on the blockchain and retain ownership of the personal information on the blockchain. HB 2093 would prohibit trustees of any defined contribution plan or state insurance company’s health benefit investment vehicle from investing in altcoins.|
|TX||Friendly||Legislation defeated||Texas’ official position is altcoin is not money and therefore, not subject to regulation. Despite this, Texas has permitted a real estate transaction to occur with bitcoin. HJR 89 (2017) would have amended the state’s constitution to establish the right to own and use any medium of exchange.|
|UT||Friendly||Regulated/Legislation defeated||HRC 006 (2015) would have allowed taxes to be paid with altcoins. SB 175 (2017) allowed the state’s unclaimed property to include altcoins.|
|VT||Friendly||Regulated/Legislation introduced||HB 868 (2016) allowed blockchain data to be used in the state’s court system. HB 182 (2017) defined altcoins to be subject to state money transmitter rules. SB 135 (2017) would allow the state to study the integration of blockchain technology. SB 269 would create a regulatory framework for blockchain projects.|
|VA||Friendly||Regulated/Legislation introduced||HB 1608 (2017) allowed fiduciaries to manage digital properties. HJR 153 (2018) would establish a subcommittee to study the implications of blockchain technology in state recordkeeping.|
|WA||Hostile||Regulated/Legislation introduced||SB 5031 (2017) made altcoin businesses subject to state money transmission laws. HB 1045 (2018) would add additional licensing requirements on money transmitters.|
|WV||Hostile||Banned||HB 2585 (2017) recognized altcoins as money but banned its use in the state due to its association with crime.|
|WI||Murky||Not regulated||State money transmitter rules require altcoin companies to sign an agreement to not use altcoins to transmit fiat currency.|
|WY||Friendly||Legislation introduced||HB 70 (2018) would make utility tokens neither money nor a security for the sake of those that may exchange such tokens. HB 19 (2018) would exempt altcoins from the state’s Money Transmitters Act. HB 101 (2018) would allow corporations to use blockchains to maintain corporate records. HB 126 (2018) would allow the creation of LLCs favorable to blockchains. HB 111 (2018) would exempt altcoins from state property tax.|
Be the first to know what is going on in the bitcoin and altcoin market. Sign up for the Bitcoin Market Journal investor newsletter.